What role do regulators play in managing climate risk?

Regulators play a critical role in managing climate risk by enforcing necessary regulations for disclosures. This function is essential because it ensures that companies are transparent about their climate-related risks and how those risks can affect their financial performance. By mandating disclosures, regulators help create a standardized approach for companies to communicate their climate risk exposure, strategies for mitigation, and the potential impacts on their operations and financial results. This information is vital for investors, stakeholders, and the public, as it enables them to assess the sustainability and resilience of companies in the face of climate change.

Furthermore, by enforcing these regulations, regulators can drive a broader cultural shift within the corporate sector, encouraging more companies to take climate risk seriously and to incorporate sustainability practices into their business models. This regulatory approach supports the overall transition towards a more sustainable economy by fostering accountability and guiding firms in their climate-related decision-making processes.